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Financial Accounting Advisory Services The Indian Companies Act May 2013

Financial Accounting Advisory Services - EY · Financial Accounting Advisory Services ... Equatorial Guinea, Ethiopia, Gabon, Ghana, ... Page 7 The Indian Companies Act

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Financial Accounting Advisory Services The Indian Companies Act May 2013

Page 2 The Indian Companies Act

Agenda

About EY 3

The Indian Companies Act 5

Indian Companies Bill 2012 8

Appendix 14

Contacts 15

This document is only for circulation to the EY network outside India.

Page 3 The Indian Companies Act

About EY

Page 4 The Indian Companies Act

EMEIA Sub-areas

EY Global

Countries worldwide

140

Employees worldwide

167,000

US$ revenue (2011-12)

24.4b

Africa Angola, Botswana, Republic of Congo, Equatorial Guinea, Ethiopia, Gabon, Ghana, Guinea, Ivory Coast, Kenya, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Tanzania, Uganda, Zambia, Zimbabwe

Belgium and Netherlands

Germany, Switzerland and Austria

Commonwealth of Independent States Azerbaijan, Belarus, Georgia, Kazakhstan, Russia, Ukraine, Uzbekistan

Central and Southeast Europe Albania, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, FYR of Macedonia, Malta, Moldova, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey

France, Maghreb and Luxembourg France, Luxembourg, Algeria, Morocco, Tunisia

Financial Services Organizations Belgium, Channel Islands, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Switzerland, UK

India

London

Mediterranean Italy, Portugal, Spain

Middle East and North Africa Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Pakistan, Palestinian Authority, Qatar, Saudi Arabia, Syria, United Arab Emirates

Nordics Denmark, Finland, Norway, Iceland, Sweden

UK and Ireland UK, Isle of Man, Republic of Ireland

Page 5 The Indian Companies Act

The Indian Companies Act Key changes

Page 6 The Indian Companies Act

Introduction and key changes

The Companies Bill 2012 (The Bill) will replace the Companies Act 1956 that is currently in force in India. The Bill will have a significant impact on listed entities and unlisted Companies with subsidiaries.

Indian Companies Bill 2012 ► Proposed changes will affect financial accounting, corporate governance and audit. ► They will have far-reaching consequences that should be evaluated by affected

companies now. Fixed assets accounting ► The Bill has proposed useful lives (prescribed in Schedule II) as the basis for

calculating depreciation, instead of the straight-line method and written-down value rates currently followed.

► Component accounting will be made mandatory – useful life of significant part to be determined separately.

► Fixed assets register to be maintained, but to comply with all the new requirements.

Page 7 The Indian Companies Act

Key changes

Consolidated financial statements (CFS) ► Preparation of CFS mandatory for all companies with subsidiaries, including unlisted

companies ► CFS to be prepared in the same form and manner as stand-alone financial statements,

and include all applicable notes and disclosures ► Intermediate unlisted parent not exempt from preparing CFS Internal control over financial reporting ► The Bill requires a company’s CEO or CFO to certify internal control over financial

reporting Mergers, amalgamation and reconstruction ► The Bill prohibits investment through more than two layers of investment company ► Treasury shares: the Bill prohibits companies from holding shares in the trust or

otherwise ► Accounting treatment of schemes, in respect of all companies (including unlisted), to be

in compliance with the notified accounting standards

Page 8 The Indian Companies Act

Indian Companies Bill 2012 How we can help

Page 9 The Indian Companies Act

Indian Companies Bill diagnostic

Objective

► Identify impact of the bill on various workstreams

How we help

► Understand current status in each critical workstream

► Compare the current status with the Bill’s requirements

► Identify gaps and suggest remedial actions

How it will benefit you

► Structured process to identify changes needed in the workstream to comply with the Bill

► Provide sufficient time for management to plan and implement remedial action

Page 10 The Indian Companies Act

Fixed asset assistance

Objective

► Significant changes in depreciation requirements under the Bill – component accounting, depreciation as per useful life and Revised Schedule II depreciation rates

► Companies need to reconfigure fixed asset records

How we can help

► Understand current fixed asset records and accounting policy

► Benchmark the policies and identify changes needed in fixed asset accounting

► Suggest remedial actions required in fixed asset records

► Help management to carry out update of fixed asset records

► Provide Microsoft (MS) Access and MS Excel tools for better compilation of fixed asset records

How it will benefit you

► Free up finance team by dealing with updating of voluminous data

► MS Access and MS Excel tools are cost-effective solutions to manage fixed asset register better (for non-ERP environment)

Page 11 The Indian Companies Act

Consolidation assistance

Objective

► The bill mandates preparation of consolidated financial statements for all companies, including unlisted companies

► Consolidation is mandatory, even for intermediate holding companies

How we can help

► Assist management to prepare consolidated financial statements in accordance with Indian GAAP

► Assist management to deploy consolidation tools such as Hyperion, SAP Business Planning and Consolidation module

► Provide timely advice on various consolidation issues

► Assist to develop the consolidation system, using MS Access and MS Excel solutions

► Customized training for finance staff

How it will benefit you

► Specialist assistance to the finance team, so they spend less time on consolidation

► Specialist advice on various consolidation-related issues.

► Development and update of systems and processes

► Knowledge transfer – updating skill set of finance team in preparation for ongoing consolidation

Page 12 The Indian Companies Act

Internal control over financial reporting assistance

Objective

► The bill requires CEO or CFO to certify that internal financial controls are adequate and functioning appropriately

How we can help

Help management to strengthen internal financial controls: ► SOX-type framework ► Accounting manual ► Consolidation manual ► Financial statement close

process ► Update or development of chart

of accounts ► Training of finance team ► Help to document technical

accounting position papers, estimates and judgments

► Desk-top review of financial statement to identify disclosure gaps

How it will benefit you

► Strengthen your internal controls over financial reporting

► Expert assistance in dealing with complex accounting matters

► Focused training to help ensure update on all key accounting and reporting related requirements

► Management assistance to help ensure appropriate disclosures in financial statements, in accordance with Indian accounting standards and industry peers

Page 13 The Indian Companies Act

Mergers, amalgamation and reconstruction

Objective

► Appropriate accounting in cases of mergers, amalgamations and reconstructions, that is in compliance with relevant GAAP

How we can help

► Transaction support: ► Assess accounting

implications before the deal and identify accounting policy differences involving multiple GAAP

► Assistance for purchase price allocation, reverse GAAP conversions, preparation of opening balance sheet, evaluation of impact on EBITDA and equity

► Harmonization of target accounting policies and systems

► On-call assistance for complex accounting issues

How it will benefit you

► Structured process to identify accounting implications based on relevant GAAP

► Specialist assistance to help the finance team to harmonize accounting policies and procedures

► Specialist advice on complex accounting issues

Page 14 The Indian Companies Act

Appendix

Page 15 The Indian Companies Act

Financial Accounting Advisory Services contact

R. Balachander Markets Leader – India + 91 124 464 4080 [email protected]

EY | Assurance | Tax | Transactions | Advisory About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2013 EYGM Limited. All Rights Reserved. EYG no. AU1794

EMEIA Marketing Agency 1000307 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com